South stress on developmental outcomes for Nairobi MC10

In their statements at the 31 July Trade Negotiations Committee meeting, developing countries underscored the need for the forthcoming WTO Ministerial Conference in Nairobi to yield development-friendly results.

by Kanaga Raja

GENEVA: A number of developing countries at the formal meeting of the WTO Trade Negotiations Committee on 31 July underlined that the upcoming 10th Ministerial Conference (MC10), taking place for the first time on the African continent, must deliver on development outcomes, in particular for the African and least developed countries.

In statements following the reports by the Chair of the TNC and the chairs of the various Doha Round negotiating bodies, the African Group, for instance, said that the Nairobi Ministerial, taking place on the most marginalized continent, presents an opportunity for the WTO to deliver development outcomes.

The African, Caribbean and Pacific (ACP) Group said that any final development outcome at the Nairobi MC must be of benefit to developing countries, in particular Africa.

Developing countries who spoke at the TNC, either in group statements or on their own, generally continued to stress that the Rev. 4 draft agriculture modalities text and the Rev. 3 draft NAMA text should be the basis for the negotiations.

They underlined that the issues of Special Products (SP) and Special Safeguard Mechanism (SSM) are “must-haves” for MC10, and that the LDC package, cotton and development outcomes are also essential for a successful outcome at MC10.

The issues of special and differential (S&D) treatment and less than full reciprocity were also highlighted by the developing countries. They stressed that all mandates including the 2001 Doha Ministerial Declaration, the July 2004 Framework Agreement, the 2005 Hong Kong Ministerial Declaration and the 2013 Bali Ministerial Declaration remain valid.

The G20 developing-country grouping underlined that agriculture would define the level of ambition for all other areas, and that recalibration cannot compromise the important reforms that were to be made in agriculture under Rev. 4.

India highlighted, amongst others, the centrality of the “development dimension” as enshrined in all the Ministerial Decisions starting with the Doha Declaration, and that “less than full reciprocity” and S&D within and across all negotiating areas are non-negotiable.

India also underlined that a permanent solution on public stockholding for food security purposes is an essential deliverable at Nairobi (see following article for a more detailed report on India’s statement).

Bridging differences

According to trade officials, Barbados, on behalf of the ACP Group, said that all mandates including the 2001 Doha Ministerial Declaration, the July 2004 Framework Agreement, the 2005 Hong Kong Ministerial Declaration and the 2013 Bali Ministerial Declaration remain valid.

There is a need for members to continue the work, Barbados said, adding that elements in a paper put forward by the ACP Group could lead to bridging differences. (The ACP paper is on bridging gaps on the remaining DDA issues and development outcomes for MC10.)

Barbados stressed the importance of cotton and underlined that the Rev. 4 draft agriculture modalities text should be the basis for any kind of market access in agriculture. It is very important that flexibilities be preserved for LDCs and the Small and Vulnerable Economies (SVEs).

It also stressed the need for a substantive outcome in domestic support in agriculture. It said that the issues of SP and SSM, tropical products and tariff escalation need to be addressed.

On non-agricultural market access (NAMA), it said that flexibilities made available to LDCs and SVEs in the Rev. 3 draft modalities text need to be preserved. On non-tariff barriers (NTBs), Barbados said it is looking to see perhaps a working group set up, similar to the working groups on trade, debt and finance, and on transfer of technology.

On services, Barbados noted that there are 60 proposals on the table. Annex C of the Hong Kong Ministerial Declaration should be the basis for the negotiations. It would like to see the qualification standards that are being applied to services professionals by many developed countries relaxed or eliminated. This would facilitate greater Mode 4 access.

Since the WTO Ministerial Conference will be taking place in Africa for the first time, any final development outcome must be beneficial for developing countries and Africa in particular. This would mean some kind of firm agreement on cotton, and an outcome on specific proposals on S&D.

With only 14 working weeks left after the summer break, members will need to increase the level of intensity, said Barbados.

Bangladesh, on behalf of the LDCs, said that the ACP and G90 (on textual suggestions on S&D) papers are important contributions. Members cannot shift from the emphasis on the implementation of the Bali decisions, particularly the four that pertain to the LDCs.

The LDCs would like to see substantive reductions in overall trade-distorting domestic support (OTDS) by the major subsidizers in agriculture, with the LDCs exempt from any reduction commitments.

On NAMA, the issue of preference erosion needs to be addressed, as well as NTBs. And there is a need to bind the duty-free, quota-free market access provisions into the schedules of the developed countries.

On services, Bangladesh said that with respect to the LDC services waiver, it needs to see a much larger number of notifications coming from the rich countries.

The LDCs should not be required to make any kind of commitments, and there is a need for trade-related technical assistance.

Bangladesh stressed that an LDC package must emerge from Nairobi. This is essential and the major players need to show leadership to get there, it added.

A meaningful outcome

Lesotho, on behalf of the African Group, stressed the need for a result to emerge in the coming weeks that would enable members to achieve a meaningful outcome in Nairobi. A new mandate for the negotiations is not needed, Lesotho said, noting that the DDA mandate is already there. There are no other guidelines for these negotiations.

The Nairobi Ministerial, taking place on the most marginalized continent, presents an opportunity for the WTO to deliver development outcomes.

There is a need for agreement in agriculture, NAMA and services. There is also a need for all the three pillars in the agriculture negotiations (i.e., market access, domestic support and export competition) to be addressed.

There must be an outcome on domestic support in agriculture, the African Group underlined. The Rev. 4 draft agriculture modalities text is a good basis for the negotiations, it said, highlighting also the importance of SP and SSM.

There must also be a solution for cotton based on the 2004 framework and the 2005 Hong Kong Ministerial Declaration. The needs of net-food importing developing countries must be maintained as well.

On NAMA, the African Group said that the Rev. 3 draft modalities text is the basis for the negotiations. There must be S&D and less than full reciprocity.

Switzerland, on behalf of the Friends of the System group comprising about 50 developed and developing members, said that it shared the concerns about the state of the DDA. There is a need for results for MC10. It was disappointed at not being able to agree on a work programme.

It is determined to develop a package of credible outcomes for MC10. There must be an outcome that is realistic. It called on the larger members to show leadership to make sure that MC10 is a success.

On behalf of the G10 grouping, Switzerland said that the group is ready to make a contribution but there must be a balance in terms of the areas that are of interest to the G10. It cannot accept tariff capping.

On its own behalf, Switzerland expressed appreciation for the G90 and ACP proposals.

The WTO is at a crossroads. Are members really intent on concluding the Doha Round, or are they prepared to see the negotiations on the DDA continue as a kind of negotiating “zombie”, it asked.

According to Switzerland, an ambitious package is not possible, but a minimalist package is not viable either. It highlighted the need for outcomes in agriculture, NAMA and services, as well as all three pillars of agriculture.

Indonesia, on behalf of the G33 developing-country grouping, said that the Rev. 4 draft agriculture modalities text must be the basis for the negotiations. SP and SSM are “must-haves” for success at MC10. There is also a need for action on the issue of public stockholding for food security purposes, it said.

On its own behalf, Indonesia said that it wants the process to go forward in a transparent and inclusive manner. Members need to be open-minded and recalibration should not be an occasion to cherry-pick issues.

Brazil, on behalf of the G20, said that all the mandates must be respected. S&D and less than full reciprocity are the key. All three pillars are essential. The Rev. 4 text is the point from which members should be negotiating. It is a step in the direction of reforming agriculture.

Brazil underlined that agriculture would define the level of ambition for all other areas. Recalibration cannot compromise the important reforms that were to be made in agriculture under Rev. 4.

Speaking for itself, Brazil said that there is a need to revise the concepts of “realism” and “doability.”

There is no possibility of concluding an agreement without the three pillars of agriculture, especially with respect to subsidy reductions in domestic support. This is something that cannot be done in any other forum and must be done here, it said.

There cannot be any outcome that indicates a lack of balance between agriculture, NAMA and services, said Brazil, adding that it will reject upfront any proposal that would maintain or worsen the disadvantaged position of agriculture in the WTO.

Australia, on behalf of the Cairns Group, said that a meaningful outcome is needed on all three pillars. It is difficult to believe that any member could sell domestically any conclusion to the Doha Round that is devoid of meaningful results.

It noted that the major players are very far apart. The outcome of the meetings that have been held is disappointing, but an agreement is still possible.

There is a need to advance the reform process in agriculture and remove the barriers and imbalances inherited from the Uruguay Round, it said.

On domestic support, it said that there is scope for major subsidy reductions by the major subsidizers, which would still retain their policy space. An outcome on market access in agriculture would only be acceptable if it supports progress in the reform process. On export competition, it said that it is important to fulfil the mandate set by the Hong Kong and Bali Ministerial Declarations.

On behalf of itself, Australia said that members need to come back in September and define specific elements in concrete detail.

Chinese Taipei, on behalf of the Recently Acceded Members (RAMs), voiced disappointment over the failure to reach agreement on the work programme. This was not ever the objective in and of itself, however; the objective was to reach something important in Nairobi.

Saudi Arabia, on behalf of the Arab Group, said that members are at a critical juncture. The credibility of the WTO is at stake. The inability to get a work programme creates doubts that the WTO can have a successful Ministerial in Nairobi and conclude the Doha Round.

There is a need for a more focused approach but no outcome will be credible without taking into account S&D and less than full reciprocity.

Mali, on behalf of the Cotton-4 grouping, said that an ambitious outcome on cotton is critical and the group will put forward a new proposal in September.

Guatemala, on behalf of the SVEs, said that it is important that the flexibilities for the SVEs are preserved in the agriculture, NAMA and fisheries subsidies texts. If there is a lower level of ambition, then the contribution of the SVEs should be revised downwards.

Turkey voiced frustration at having missed another deadline, but in light of the last-minute breakthroughs that members have had in the last couple of years, it remained hopeful that MC10 can produce some meaningful results.

Members have to stop negotiating from static positions, Turkey said. There is a need for a fair outcome. If members fail to deliver at the WTO, the result is going to be an unbalanced outcome for many (in apparent reference to bilateral and regional agreements). A non-outcome in Nairobi would result in a diminished role for the WTO, it said.

Chile said that it does not have a great deal of hope that members will have a robust package in Nairobi. It said that members have been engaging but they have not yet reached a point where they are actually seeing convergence.

Members should not negotiate from entrenched and static positions, said Chile. If there is no successful outcome in Nairobi, it will leave the Doha Round in a permanent “zombified” state, it said.

Change of approach

The European Union said that despite the positive spirit that filled the WTO after MC9 and in particular after the resolution of last year’s stalemate on the Trade Facilitation Agreement, members have not been able to advance as much as they would have liked on the DDA.

“While we were slowly, for several months, moving away from old ideas that didn’t work in the past and starting to consider promising ideas on a without-prejudice basis, the most recent debate in the negotiating groups showed that some members have hardened their views. We will need to find the right ways to recover quickly after the summer break the progress that we had achieved and move forward.”

The numerous discussions the EU has had over the last few months have clearly showed that a change of approach was needed to reach an acceptable compromise. Although this may be difficult for some to hear and even more difficult to accept, the lessons from this exercise have been clear: if any deal is to be reached, then the ambition has to be lower than in 2008, and this adjustment needs to take place across all negotiating areas, said the EU.

The discussion on domestic support and market access clearly showed what is and what isn’t possible. Those who shut their eyes to this reality and demand high levels of ambition on the one hand, yet coupled with flexibility regarding their concessions on the other, are merely pushing this organization toward another failure.

According to the EU, there is a need to target a different level of ambition than in 2008; to accept that no member will give concessions requiring major reforms of its trade and agricultural policies; to ensure proportionate contributions within and across all areas by all key WTO members, in line with their roles in international trade, while of course bearing in mind the development orientation of the Round.

“This recipe is the best hope to advance. Unfortunately, it has not yet been sufficiently accepted by all.”

The EU said it is deeply worried that there are also more fundamental differences with regard to the interpretation of the significance of MC10.

For some, including the EU, the Nairobi Ministerial is the last stop to have a meaningful and full DDA outcome. At the same time, some others seem to consider that a partial outcome could be pursued in Nairobi and that the DDA process could then continue levitating unharmed for many more years.

“While some mini-deliverables may have contributed to maintain a certain momentum in the past, this is no longer a valid option at this juncture. Already today, the negotiating function of this organization is not delivering on the issues and at the pace expected by the world’s traders. MC9 provided us all with a bit of breathing space, but if we do not use this chance to advance on the DDA, the attention will entirely move elsewhere.”

While it is undisputable that agriculture is the central element of the Round and will need to be resolved in order to get any feasible deal, all issues need to advance in parallel. Otherwise, in fact, all of the individual issues will remain blocked as all are somehow interlinked.

Domestic support is clearly the ambition setter of what can be achieved in the DDA. However, discussions have proven that the only realistic way forward is to focus on an outcome which respects members’ current policies, but also restrains trade-distorting support by introducing constraints and eliminating loopholes so as to encourage further reform. Focusing on OTDS may in fact be the only way to advance.

Market access needs to be adjusted to today’s reality and needs to be considered horizontally in the sense that similar recalibration must occur in both agricultural market access and NAMA. They involve recalibration by a certain factor, simplification and flexibility for all members in implementation (i.e., an “average tariff cut” approach). In this approach, there is no room for unrealistic expectations, such as on tariff rate quotas.

The EU said there is willingness to advance toward a good outcome on export competition, but only as part of a broader DDA package. Export competition has to be part of any DDA deal but it cannot be the only element of an outcome. (SUNS8076)                      

Third World Economics, Issue No. 598/599, 1-31 August 2015, pp4-7